Supreme Court upholds Ontario ban on house-brand generic drugs

Ontario can prohibit drugstore chains from offering their own house-brand generic drugs as it seeks to lower drug prices, the Supreme Court of Canada has ruled.

The court said its role is not to decide whether the ban was good or bad policy or whether the ban would actually work to keep prices down. The main issue was whether the ban fit the purpose of Ontario’s drug-regulatory system.

It did, the court said in a 7-0 ruling that outlined in sympathetic terms the large task facing government. In 2007, generic drugs were three times more expensive in Ontario than in France, Germany and Britain, and five times more expensive than in the United States, the court said, citing an Ontario government report. And Canada spends more on prescription drugs per capita than most developed nations, the court said.

The ruling, closely watched across the country, “means that other provincial governments facing challenges in hidden drug costs can safely have resort to regulations” such as Ontario’s, University of Montreal law professor Paul Daly said in an interview.

“And even though those regulations are not always effective at achieving their goals, the courts are not going to intervene to strike them down. The court was very conscious of the importance of the goal of reducing drug costs.”

The government’s resounding victory caps what the court called a “totemic struggle” between the province and drug companies over the price of generic drugs. In 2006, Ontario barred drugstore chains from receiving rebates from pharmaceutical manufacturers as an incentive to stock their products. Those rebates amounted to about $750-million, and helped to boost the price of generic drugs. The manufacturers then replaced those rebates with “professional allowances” worth about the same amount, and Ontario banned those in 2010. Shoppers Drug Mart then offered its own “private label” or house-brand generic drugs, but Ontario said this was merely an attempt to get around the ban on rebates and professional allowances.